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AfDB approves US $50 million Risk Participation Agreement with Union de Banques Arabes et Françaises to Boost Trade Finance in Africa
The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, May 7 in Tunis an unfunded US $50 million Risk Participation Agreement (RPA) with the Union de Banques Arabes et Françaises - U.B.A.F. to support trade origination capacities of African Issuing Banks. The facility will help address critical shortfall in commercial financing for trade in Africa and is expected to benefit such vital economic sectors such as agribusiness and light manufacturing. It will also facilitate access to intermediate goods to help Regional Member Countries move up the value chain. Moreover, it will foster financial sector development, regional integration and contribute to generation of government revenue in various countries.
Most African banks lack scale and have capital bases that tend to restrict their ability to obtain adequate trade credit from international banks and inhibit their capacity to originate large ticket transactions that would typically have substantial development impact. U.B.A.F. is a dedicated trade finance bank with more than 40 years’ experience and a wide network covering 18 African countries through 187 banking relationships. The AfDB’s added value lies in the use of its “AAA” rating to share risk with U.B.A.F. to help enhance the trade finance capacity of African banks and financial institutions, thereby expanding trade and strengthening regional integration.
The RPA is a 50-50 risk-sharing structure which is aimed at broadening the availability of trade finance across Africa over a three-year period by targeting SMEs and indigenous firms. U.B.A.F. and AfDB will both provide an undertaking of US $50 million, thereby creating a portfolio of up to US $100 million. Including roll-overs, this facility is expected to facilitate approximately US $600 million of trade in intermediate and finished goods, raw materials and equipment to support the continent’s economic growth.
U.B.A.F. S.A. is a French registered bank established in 1970. Its shareholders originate from 19 Arab countries along with Crédit Agricole Corporate & Investment Bank. U.B.A.F. activity focuses on financing trade with the Arab world. With its international network in Asia, the Arab World, Europe and Africa, U.B.A.F. has become a key player in the area of Trade Finance with Arab countries. U.B.A.F. is able to meet the needs of both importers and exporters and to secure the flows of payments and goods from industrial or trade commodity companies.